Overview of Foreign Currency Valuation Accounting for Financial Services

This feature enables banks to manage their foreign currency exposures and comply with regulatory requirements through a comprehensive currency valuation process.

It involves position accounting, which determines net exposure to market risks by moving the foreign currency exposure for revenue and expense accounts to the balance sheet, followed by revaluations that adjust account balances to their current fair market value.

This feature is applicable to financial institutions and the banking sector, in particular, that adhere to regulatory requirements from the Basel Committee on Banking Supervision (BCBS), European Central Bank (ECB), and European Banking Authority (EBA).

Use the Transfer Income Statement Account Balances to Foreign Exchange (FX) Position Accounts and Revalue process to manage the foreign currency exposures. The process contains a subprocess for FX transfer and a subprocess for FX revaluation.

This table describes the subprocesses.

Subprocess	Description
FX Transfer	According to regulatory requirements, revenues and expenses are reported exclusively in the ledger currency, and fluctuations in conversion rates are recorded in separate revaluation gain and loss accounts. This subprocess generates journal entries to move foreign currency balances in revenue and expense accounts to FX position-related balance sheet accounts. These balance sheet accounts are subsequently revalued using the FX Revaluation subprocess. This process is optional.
FX Revaluation	Periodic revaluation is performed for FX position-related balance sheet accounts due to fluctuations in currency conversion rates to ensure the account balances accurately reflect these changes. Revaluation gains and losses are recorded for each foreign currency, with distinct gain and loss accounts allocated for each class of balance sheet account within each currency.

Subprocess

Description

FX Transfer

According to regulatory requirements, revenues and expenses are reported exclusively in the ledger currency, and fluctuations in conversion rates are recorded in separate revaluation gain and loss accounts.

This subprocess generates journal entries to move foreign currency balances in revenue and expense accounts to FX position-related balance sheet accounts. These balance sheet accounts are subsequently revalued using the FX Revaluation subprocess.

This process is optional.

FX Revaluation

Periodic revaluation is performed for FX position-related balance sheet accounts due to fluctuations in currency conversion rates to ensure the account balances accurately reflect these changes.

Revaluation gains and losses are recorded for each foreign currency, with distinct gain and loss accounts allocated for each class of balance sheet account within each currency.

Here’s a summary of the steps to set up and use this feature.

Set up FX transfer and FX revaluation.
Create a revaluation definition using the Manage Revaluations task.
Run the Transfer Income Statement Account Balances to FX Position Accounts and Revalue process.

Users with the Define Oracle Fusion General Ledger Revaluation (GL_SET_UP_GENERAL_LEDGER_CURRENCY_REVALUATION_PRIV) and the Run Revalue Balances Program (GL_RUN_REVALUE_BALANCES_PROGRAM_PRIV) privileges can create the setup, define the revaluation template, and generate the entries.

Note: These privileges are also assigned to the General Accounting Manager (ORA_GL_GENERAL_ACCOUNTING_MANAGER_JOB) and General Accountant (ORA_GL_GENERAL_ACCOUNTANT_JOB) job roles.